Commentary and analysis on markets, personal finance, and wealth building from a contrarian perspective. "I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting there and trying to dream it up all yourself. Nobody’s that smart."
— Charlie Munger

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Saturday, December 26, 2015

Will electric vehicles displace OPEC?

OPEC’s World Oil Outlook released today is a remarkable
document, the apologia of a pre-modern vested interest that refuses to see the
writing on the wall.

The underlying message is that the COP21 deal is of no
relevance to the oil industry. Pledges by world leaders to drastically alter
the trajectory of greenhouse gas emissions before 2040 - let alone to reach
total "decarbonisation" by 2070 - are simply ignored.

(skip)

Goldman Sachs says the model to watch is Norway, where electric
vehicles already command 16.3pc of the market. The switch has been
driven by tax exemptions, priority use of traffic lanes, and a forest of
charging stations.

California is following suit. It has a
mandatory 22pc target for 'grid-connected' vehicles within ten years.
New cars in China will have to meet emission standards of 5 litres per
100km by 2020, even stricter than in Europe.

I believe we will see more and more electric cars especially in smaller countries and in cities. However, I do not believe that they will displace all internal combustion engines in a short period of time. The existing batteries still limit range for one thing. Another reason is the sunk cost of all the existing cars and light trucks on the road already. Fuel is relatively cheap and people like their SUV's. Nevertheless this is good news for lithium producers as the demand for lithium should rise even with modest growth in the electrification of the world car fleet.